Question
On January 1, Lessee Company leases a vehicle with a fair value of $30,000 from Lessor Company for 3 years, with no renewal options. The
On January 1, Lessee Company leases a vehicle with a fair value of $30,000 from Lessor Company for 3 years, with no renewal options. The estimated life of the vehicle is 6 years and Lessee Company has an option to purchase the vehicle at lease end at the vehicles fair value, which the lessee is not expected to exercise. The monthly lease payment is $520, with the first payment due immediately. Lessee Companys incremental borrowing rate is 6% and the lessee is not readily able to determine the lessors implicit interest rate. Title to the equipment remains with the lessor at lease end and the lessee does not guarantee the residual value at lease end. Lessee Company will pay for the maintenance of the vehicle separately from the lease.
A. Present value of lease payment?
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